Anglo-American
Contract and Torts
Prof. Mark P. Gergen
18. Manifested Assent—Offer and
Acceptance and the Objective Theory
Obligation in contract requires
1)
Manifested assent to the obligation (such
as by promise, agreement, offer and
acceptance . . .).
2)
A legal basis for enforcing the obligation
such as consideration.
3)
Sometimes written evidence of the
obligation under the statute of frauds.
Objective theory
When there is a misunderstanding about the
existence or meaning of a contract, the law
adopts the more reasonable view.
Generally a party is held to the terms of a contractual
document he signs even if does not read the document.
Adams v. Lindsell, Text 131. D mails an
undated offer that is mis-addressed and so
delivered late. P mails immediate acceptance.
D sells goods in interim. There is a contract.
D was more at fault in the misunderstanding
about the timeliness of the acceptance.
Contract does not require a “meeting of the minds.” A
person may conclude a contracting not intending to do so.
Common law rejects the “will theory” of contract. A contract is
a product of outward manifestation of intent. Not actual
intent.
But assent is not always determined objectively.
Generally the law gives effect to shared subjective
understanding. A and B pretend to make a contract to fool C. There is
no contract between A and B.
A known and sometimes even a suspected error in
communication cannot be exploited.
A gives B papers to sign knowing B will not read them
carefully. A craftily includes among the papers a contract
A knows B would never agree to. There is no contract
though B signs. A may be liable for fraud for knowingly
misleading B.
Raffles v. Wichelhaus, Text 133.
Contract for India cotton to be delivered by the “Peerless.” B
understands this to mean the Peerless that sailed from India
in October. S understands it to mean the Peerless that sailed
in December. B refuses to accept delivery of cotton from the
later vessel.
Milward makes 2 arguments at Text 134: i) the
misunderstanding was immaterial; ii) evidence there were 2
ships is inadmissible to challenge written agreement.
Mellish argues there was “consensus ad idem” (“no
meeting of the minds”) and so no contract. Court
agrees.
Unstated premise is that neither party is more at fault. If
point of disagreement is material then there is no contract.
The contract fails based on “mutual misunderstanding.”
Contract is voidable, not void. Either party may opt to
affirm the contract by embracing the other party’s
understanding.
The misunderstanding must be material.
If performance has occurred, then conduct may resolve the
misunderstanding. If not, then there will be a restitution
(noncontractual) claim for compensation for any benefit
conferred.
Review
Objective theory--if there is a misunderstanding about
existence or terms of contract, then courts generally adopt
the more reasonable view.
Courts will give effect to shared subjective understanding.
A party may not take advantage of an error in
communication if he knows or has good reason to know of
the error.
Mutual misunderstanding on a material term makes a
contract voidable.
“An offer is the manifestation of a willingness to enter into a
bargain, so made as to justify another person in
understanding that his assent to that bargain is invited and
will conclude it.”
Restatement 2nd § 24
Did the sender reasonably appear to intend to invite
the recipient to conclude a contract by acceptance?
An offer terminates if a stated time limit passes, after a
reasonable time, if it is rejected, if it is revoked, if the
offeror dies, etc . . . . Text 125-129.
An acceptance must be unequivocal and on the terms of
the offer to be effective. Text 129-130. “Mirror image
rule.” This is relaxed by UCC § 2-207.
Adams v. Lindsell, Text 131. D mails an
undated offer that is mis-addressed and so
delivered late. P mails immediate acceptance.
D sells goods in interim.
The contract is formed when P mails the acceptance. This
is called “the mailbox rule.”
P’s power to accept would be terminated if D communicated
the fact it had sold goods to another before P accepted under
the rules on revocation.
Carlill v. Carbolic Smoke Ball Co., Text 124
Advertisement in newspapers to pay £100 to anyone who
bought and used “smoke ball” as instructed and who
contracted influenza.
An advertisement generally is not interpreted as an offer.
People do not generally make open-ended commitments to
the public.
What facts make this general rule inapplicable? What fact
did Lindley LJ think was crucial? See Text 124 bottom.
Livingstone v. Evans, Text 126.
(1) S offers land to B for $1800
(2) B counter-offers $1600 and asks S for his lowest price.
(3) S replies “Cannot reduce price.”
(4) B accepts original offer.
Is there a contract? Did B reasonably believe initial offer
was still on the table when he accepted? Why?
If S had sold the land before he received B’s acceptance, then would B have a
breach of contract suit against S?
Re Cowan & Boyd, Text 127. Landlord offers to renew lease
at increased rent. Tenant rejects and offers to renew at
current rent. Landlord responds he will visit to talk the matter
over. Walsh says this is a harder case. Why?
An offeror is presumed to have the power to revoke an offer.
Generally an offer is irrevocable only if the offeror explicitly
promises to hold offer open and there is a legal basis for
enforcing the promise, including
•Consideration (bargain in US)
•UCC § 2-205 (firm offer for sale of goods in writing signed
by merchant)*
•Promissory estoppel/reliance
* Binding for a reasonable time not more than 90 days.
In European law there is a general rule that such a commitment is binding.
See Unidroit Article 2.1.4(2)(a). And an offer stating a fixed time for
acceptance is interpreted as a firm offer. CISG Art. 16(2)(a); Principles of
European Contract Law 2.202(3)(b).
Rules on offer and acceptance determine assent when parties
communicate by post or other remote means.
Many of these are background rules. They can be altered
by a clear expression to the contrary.
Once there is performance and conduct by both parties
recognizing the existence of a contract, there is tacit or
implicit assent to a contract. It is unnecessary to find a
contract based on the parties communications.